TORONTO, ONTARIO--(Marketwire - Oct. 31, 2012) - Martinrea International Inc. (TSX:MRE) today announced that it will report its financial results for the third quarter ended September 30, 2012, at close of business on November 13, 2012. Martinrea also announced today an update on anticipated operating results for the second half of the financial year and the costs associated with its program launches and operations.
While it is still finalizing its financial results for the third quarter, Martinrea expects that its third quarter revenues will be approximately $655 million, excluding tooling revenue, which is slightly lower than previously announced, and expects that its adjusted earnings per share(1) would be $0.17 per share, in line with previous announcements. Martinrea adjusts earnings for unusual and other items, but launch costs and operational expenses are expensed. As stated in the Company's press release for its second fiscal quarter ended June 30, 2012, the possibility of increased launch costs and some other operational expenses could impact third quarter results, and that did occur in the quarter.
The Company's operations are running well in many plants and meeting or exceeding expectations. However, launch costs and other operational costs in several plants have negatively impacted results. At this stage, while early in the fourth quarter, the Company anticipates that adjusted earnings will continue to be affected by such costs. The Company anticipates launch and operating costs for the fourth quarter to be similar to those of the third quarter, however, such costs may exceed those in the third quarter depending on when operations at facilities launching new programs are normalized and launch and other costs decline. As a result of these increased costs, Martinrea's previously announced budget estimate, absent unusual and other items, of 2012 earnings of $1.05 per share or more will not be met. The Company continues to estimate that 2012 revenues and adjusted net income overall will be higher than in any previous year in the Company's history. The Company continues to anticipate that 2013 revenues and adjusted earnings per share will be at record levels absent unanticipated events. The Company will not be providing specific numbers with respect to 2013 given the uncertainty of the timing and duration of launch costs and other operational costs and the worsening financial outlook in Europe which negatively impacts the operations of Martinrea Honsel overall.
As the Company is in the midst of its greatest launch load in its history, many of the Company's plants are currently involved in launch activity and are incurring launch costs. Most launch activity is progressing well and is anticipated to be substantially completed by year end.
The Company is also providing an update on operations in selected plants.
Martinrea's Shelbyville, Kentucky plant is in the midst of the largest single launch in the Company's history. While the ramp up has been unprecedented and in a compressed time frame as the customer sells vehicles and builds inventory in connection with the launch of the Ford Escape, the Shelbyville plant has satisfied customer daily production requirements since the first week of September, 2012. Operations have stabilized and the Shelbyville plant is now focused on cost reduction. Further, operational improvements to certain production lines are planned over the Christmas break when there is downtime in production, with the objective of increasing throughput and lowering cost. In the meantime, the plant is running at full capacity and is incurring launch costs relating to extra people, overtime, and other costs and inefficiencies, all of which are expected to decline over time as the Company reduces cycle times, improves output per hour, improves efficiencies and in general rationalizes its operations.
The Company's Hopkinsville, Kentucky facility is involved in several launches simultaneously, together with existing programs, which has resulted and is resulting in significant costs, as the plant deals with the increases in volume. As previously noted, the Company experienced a major equipment failure at this facility in June and July which involved substantial one-time costs. Although the press is now operational again, some of the facility's weld assembly lines are struggling to keep up with the aggressive volume requirements of the Company's customers. The customer volume requirements and the need to upgrade and improve equipment performance simultaneously is resulting in substantial cost for overtime, extra personnel, and customer charge backs including expedited freight to meet customer deadlines. While operations are improving, not as quickly as desired but steadily, significant costs have been and are being incurred.
Nick Orlando, Martinrea's President and Chief Executive Officer, stated: "Our top priority continues to be the improvement of our operations at facilities launching new programs, some of which are currently underperforming, but improving. As it relates to our most recent new program launches, we have not consistently performed up to our standards. In terms of our launches and launch costs, these are substantial investments to support business awards that will generate future sales and earnings in most cases for many years to come."
Rob Wildeboer, Martinrea's Executive Chairman, stated: "Our launch costs have been more substantial than we anticipated a year ago, as our launch schedule has been compressed mainly into the second half of the year and as ramp ups have been heavier than anticipated, in part because of the fact that the North American automotive market is so robust right now and we happen to be involved in some very popular platforms. While 2012 is our year of the launch, unfortunately it is also the year of launch costs for us. As for operational improvements, we will make them as we always have, but they are costly right now and they take time. Both the launch costs and the operational costs should go away over time, and we anticipate a record year next year, and a strong and healthy future. We have a great team here at Martinrea, and we are proud of how they have performed for us and for our customers."
The Company will provide an update on the fourth quarter in its third quarter conference call in mid November.
A conference call to discuss the third quarter results will be held on Wednesday, November 14, 2012 at 8:00 a.m. (Toronto time) which can be accessed by dialing 416-340-8410 or toll free 866-225-2055. Please call 10 minutes prior to the start of the conference call.
If you have any teleconferencing questions, please call Andre La Rosa at 416-749-0314.
There will also be a rebroadcast of the call available by dialing 905-694-9451 or toll free 800-408-3053 (conference id - 4555837#). The rebroadcast will be available until Wednesday, November 28, 2012.
(1) The Company reports its financial results in accordance with International Financial Reporting Standards ("IFRS"). However, the Company has included certain non-IFRS financial measures in this Press Release that the Company believes will provide useful information in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to the other financial measures determined in accordance with IFRS. Non-IFRS measures referred to in the analysis include "adjusted earnings", "adjusted net income" and "adjusted earnings per share".
Special Note Regarding Forward-Looking Statements
This Press Release and the documents incorporated by reference therein contains forward-looking statements within the meaning of applicable Canadian securities laws including related to the Company's expectations as to future profitability, revenues, outlooks and earnings, statements as to the growth of the Company and pursuit of its strategies, the launching of new programs at the Shelbyville and Hopkinsville and other plants, including expectations as to the financial impact of the launches and other launch costs,, and the continuation of monitoring, managing of launch costs and operational expenses, as well as other forward-looking statements. The words "continue", "expect", "anticipate", "estimate", "may", "will", "should", "views", "intend", "believe", "plan" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments including anticipated launch costs and timing of launches, as well as other factors that the Company believes are appropriate in the circumstances. Many factors could cause the Company's actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors, some of which are discussed in detail in the Company's Annual Information Form and other public filings which can be found at www.sedar.com:
- North American and global economic and political conditions;
- the highly cyclical nature of the automotive industry and the industry's dependence on consumer spending and general economic conditions;
- the Company's dependence on a limited number of significant customers;
- financial viability of suppliers;
- Martinrea's reliance on critical suppliers and on suppliers for components and the risk that suppliers will not be able to supply components on a timely basis or in sufficient quantities;
- the increasing pressure on the Company to absorb costs related to product design and development, engineering, program management, prototypes, validation and tooling;
- increased pricing of raw materials;
- outsourcing and in-sourcing trends;
- competition with low cost countries;
- the risk of increased costs associated with product warranty and recalls together with the associated liability;
- the Company's ability to enhance operations and manufacturing techniques;
- dependence on key personnel;
- limited financial resources;
- risks associated with the integration of acquisitions;
- costs associated with rationalization of production facilities;
- the potential volatility of the Company's share price;
- changes in governmental regulations or laws including any changes to the North American Free Trade Agreement;
- labour disputes;
- currency risk;
- fluctuations in operating results;
- internal controls over financial reporting and disclosure controls and procedures;
- environmental regulation;
- a shift away from technologies in which the Company is investing;
- potential tax exposures;
- a change in the Company's mix of earnings between jurisdictions with lower tax rates and those with higher tax rates, as well as the Company's ability to fully benefit from tax losses;
- the Company's ability to shift its manufacturing footprint to take advantage of opportunities in growing markets;
- risks of conducting business in foreign countries, including China, Brazil and other growing markets;
- under-funding of pension plans; and
- the cost of post-employment benefits.
These factors should be considered carefully, and readers should not place undue reliance on the Company's forward-looking statements. The Company has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
The common shares of Martinrea trade on The Toronto Stock Exchange under the symbol "MRE".